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March 2009

Cash is king

Julian Urry is a man in a hurry. Twenty store openings are pencilled in for 2009 as Cash Generator goes from strength to strength. Neil Tague met him.

I’ve always quite liked the fact that the shimmering glass towers at the start of The Apprentice are all an atmosphere-building sham and that Sir Alan Sugar’s operations are actually run from an unprepossessing redbrick building in Essex. It’s not a hard-and-fast rule, but I’m always encouraged by businesses riding high that still keep a grip on the purse strings.The headquarters of Cash Generator, based in an industrial estate on the outskirts of Bolton, fit the no-nonsense model nicely.

And make no mistake, Cash Generator, the UK’s largest “buy and sell” chain, is riding high. Results for the year to 31 January 2009 show gross profit up 9.4 per cent to £22.6m. All areas of the business contributed – total group retail sales climbed 5.6 per cent to £32.6m, the buying of pre-owned items from the public increased 18.5 per cent, cheque cashing by 11.1 per cent and pawn broking was up 83.3 per cent – although managing director Julian Urry says pawn broking still only accounts for about 1 per cent of group business.

It’s tempting to think the recession is to thank for shoppers seeking bargains. But Urry says the downturn has merely speeded up a long-term trend. “Every year since the first store opened in 1994, Cash Generator has had year-on-year growth in all income streams. But 2008 was particularly good – we opened 13 stores and got a fantastic level of franchise enquiries through, which are being processed. We hope to open 20 stores this year, which would take us to 105.”

He believes, though, that the recession will lead to more potential business walking through Cash Generator’s doors: “As the downturn bites the typical shopper is going to try to make their pound go further, so the shops that offer the best value will do well. Shoppers are less brand-conscious than they were a year ago, which will probably be the case for some time.”

Urry says he has been helped, if indirectly, by the online trading phenomenon eBay. “There’s no doubt eBay has made the buying of pre-owned goods acceptable, and fashionable, and it’s seen as an intelligent way to shop. People enjoy going online and finding bargains.”

With this in mind, the next step is to enhance Cash Generator’s online presence. Soon the group’s financial services offerings, currency trading and Western Union transfers will be available through the website, followed by a full online retail service in the summer, where customers can access what they want from dropdown menus and contact the store concerned.

“It’s a lengthy process,” says Urry with what might be a grimace. “These things always take longer and cost more than you think.
But we are excited. It will allow more people to access Cash Generator.”

The high-street presence will help, though, as he says: “People will know they are buying from a bricks-and-mortar company – goods traded between individuals aren’t covered by the Sale of Goods Act, and I think there’s a reluctance among some shoppers to give their details over to something intangible.”

Urry joined from Cash Converters in October 2004 after a six-year stint as chief executive of the rival chain. He made the move on the promise of a future management buyout from founder Brian Lewis. He proved as good as his word, stepping aside as Urry, financial director Steve Wilkinson and franchising director Robin Page took over the business in April 2008 in a management buyout.

Lewis remains as a shareholding non-executive director, with Stephen Altman and Nigel Berger of New World Corporate Finance. Barclays Bank provided funding and, with other banks, remains supportive. A lot of that has to do with the business model, says Urry.

“Franchising operations remain attractive to banks. The statistics indicate that something like 94 per cent of franchises succeed, which is obviously far above that of start-ups. Banks are all too aware of failure rates. We’ve got tremendous support from the high-street banks.”

Only 17 of Cash Generator’s stores are controlled from the centre, the rest are run on franchises. Enquiries come in through the website and at the British Franchising Association’s quarterly exhibitions. Franchisees come from a range of backgrounds, says Urry: former finance directors and bank managers, as well as former armed forces personnel and policemen.

“What they have in common is personal skills – they are good communicators who understand management. One of our best guys once ran a pig farm.”

Once initial vetting is carried out – “it’s vital to get the right sort of person” – the franchisee’s intended location is checked out to see if the town fits the model. Franchisees embark on a ten-week induction. A property search finds a suitable store, generally 2,000 sq ft in a secondary retail location and available for leasehold. Each new store costs between £200,000 and £220,000 upfront, but the franchisee is empowered from the word go.

“We have just had two guys join us from one of the food chains, and they couldn’t believe they were asked to make decisions on issues such as hiring a fit-out company,” says Urry. “We’ll provide the drawings, but it’s important people have some control. I’m looking for people with entrepreneurial skills, not corporate types to follow a set of instructions. As a franchisor you need to earn the trust and respect of the franchisee for the relationship to work.”

Running a franchise is becoming more popular, and there are those who find they have a taste for it – a third of franchisees run more than one store, while a pair of brothers run five and will open their sixth, in Bristol, in the next quarter.

“It’s very much a business you can operate to suit your desires – some run one and are happy with a good level of income, while some have an aspiration to do more – the Yarwood brothers have now hired a regional manager for their stores,” he says.

There’s a certain snobbery about businesses like Cash Generator, perhaps because they serve disenfranchised parts of the community – cashing cheques for those without bank accounts, or prepaid credit cards for those unable to get cards approved. Does Urry feel he has to battle negative perceptions?

“No, not really,” he says. “I think once people look at a business like this and realise how heavily regulated it is, they soon come to appreciate how much goes into it – I think the legislation puts people off starting this sort of business.

“Each store we open needs 20 licences as every sphere we work in is heavily regulated by the Sale of Goods Act and anti-money laundering legislation on currency exchange. The directors are liable if the right identification is not taken and staff not trained properly. We’re just like Hertz in car hire – if we are not satisfied by the robustness of someone’s identification, we won’t deal with them.”

Cash Generator is a high-footfall business. The average store receives 5,000 visits a week and the company has bought more than 30 million items from the public.
Portable electrical goods remain the most commonly traded goods, but all sorts can cross the counter – one store last year took possession of a canoe. “That’s why people come back,” says Urry. “It’s an Aladdin’s Cave of goods at bargain prices.”

So what can we expect for 2009? Stores in Glasgow and Northampton opened in February and the North West is very much part of this year’s growth plans – Darwen, Ellesmere Port, Preston, Huyton and Cheetham Hill in Manchester are all pencilled in. Urry’s looking at Europe, too, with “master franchises” for two countries lined up. “Buying and selling pre-owned goods is a model that will work in almost any country,” he says.

He’s aiming for 150 stores by 2013, which will necessitate a greater volume of stores outside the northern heartland. But that could only be the start, he says: “What’s important is that we don’t lose sight of what our research into demographics tells us, that the UK could support 350 stores. Looked at that way, we’ve got a long way to go.”

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